Subletting your apartment (whether it’s a single room or the entire apartment) is a great way to generate passive income. But before you become a landlord, make sure you understand all the rules and regulations regarding subletting your apartment. Read on to find out more!
Rules about your eligibility for subletting
If you wish to sublet your entire apartment, you must be a Singaporean citizen who has completed your Minimum Occupancy Period (MOP).
Whether your apartment is a BTO apartment or a resale apartment, the MOP is five years. However, if you own a resale apartment purchased before August 30, 2010, you are looking at a shorter MOP of three years.
Rules about your tenants
First, be sure to respect the maximum number of tenants for the type of apartment you own.
- T1 and T2: Maximum four tenants
- Three-room apartments and larger: maximum of six tenants, respectively
Second, all sublets must be between the minimum rental period of six months and a maximum rental period of 24 months (if your tenant is Malaysian, the maximum rental period is increased to 36 months instead).
Before subletting your apartment, you will need to ensure that your tenants are legal residents of Singapore and meet the non-citizen quota.
The non-citizen quota states that only 8% of the residents of a ward can be non-citizens and only 11% of the occupants of a block can be non-citizens (Malaysians being exempt from this rule).
Check the current quota for your block or ward here.
Finally, tenants are not allowed to be tenants or owners of other HDB apartments unless they are divorced or legally separated (in which case only one party can rent an HDB apartment to another apartment owner) , or owners eligible for subletting. their entire apartment.
In addition to this, tenants are also not permitted to own Executive Condominium (EC) units, unless their five-year MOP has been met.
Additional taxes are the responsibility of the owners
When it comes to property tax, you will be taxed at lower homeowner tax rates if you sublet your rooms while staying in the same apartment. Make sure your tenant or agent stamps the tenancy agreement as “partially rented” instead of “fully rented” so your homeowner’s tax rate isn’t taken away.
However, if you sublet the entire apartment, you will be taxed at a higher rate (10% of your annual home value, or VA). AVs are calculated based on IRAS’s assessment of recent rental rates for the various HDB apartments.
If you want to estimate the amount of property tax you will have to pay when renting out your apartment, you can do so using the IRAS online calculator.
In addition to property tax, landlords are also required to pay additional income tax based on the amount of rental income they earn.
To find out more about the income tax imposed on rental income, as well as the type of deductible expenses, consult the IRAS guide.
Things to note when looking for tenants
Ideally, your tenant should have a stable job and be ready to commit to a long-term lease. Also be sure to check its references and ask to speak to its previous owners to get a better idea of what to expect.
You will want to establish the ground rules clearly and explicitly to avoid any misunderstandings and unpleasant surprises later.
This article was first published on 99.co.